Canberrans should be grateful that the Liberal Opposition is in such disarray.
It has meant that Treasurer and Chief Minister Jon Stanhope has not had to hand out any election-year lollipops in the 2008-09 Budget – well, not many.
Instead, he has dipped into cash reserves built up from past surpluses and added a bit more from future revenues to engage in a four-year infrastructure program. All very prudent and commendable.
Is the electorate getting smart enough to realise that instant gratification of handed-out government largesse is not very good for them in the long term? Possibly. Nationally, all the polls before the Federal election showed people want investment in health, education and transport rather than tax cuts and hand-outs.
Certainly, the ACT Government seems to realise the need for a long term outlook.
As the Chief Baby Boomer Jon said yesterday the hips and the knees of his generation will not last indefinitely. We need health infrastructure.
Sure, you can look at some of the line items in the capital works and infrastructure program and quibble as to whether they are really capital or infrastructure. And you may quibble whether some line items in the “climate change” section of the Budget are really about climate change or things that any sensible government would do anyway to save costly energy or replace trees that had died in the drought.
But let’s not quibble. Let’s be grateful that a Government has taken the longer view for a change.
That’s the spending of the Budget. On the revenue side, though, things are not so pretty.
The ACT has a narrow revenue base: property taxes and land sales; payroll tax (but not on the main industry in the ACT: federal administration); gaming taxes and a few other bits and pieces. There is no mining industry and no manufacturing to speak of.
Alas, the Budget figures on property revenue are hopelessly optimistic.
The Budget was presumably prepared before this week’s ABS house-price figures and various other housing measurements came out. Property prices in the ACT have levelled, are not keeping pace with inflation, or are falling, depending on which index you read.
Yet, the Budget papers project a 15 per cent increase in land-tax revenues; a six per cent increase in rates revenue and only a 4 per cent fall in conveyancing stamp duty despite the very large boom in commercial property stamp duty reaped in 2007-08 and no prospect of a repetition in 2008-09.
These are the fourth-highest, third highest and highest line items on the revenue side, totaling nearly half the ACT’s tax revenue.
In the past decade or more Governments have relied on inflation or increasing property values to push these revenues up. That is not very likely in 2008-09. More likely is that the only way these revenue targets can be met is by a legislated change in the rate of the tax – something for voters to squeal about. Stanhope must be hoping that that will not be necessary until after the October election.
Two years ago, Stanhope brought down what many thought was a harsh Budget. But it did only between a third and a half of what was necessary. At the time, the ACT was spending 131 per cent of the national average of states and territories. It is now down to 122 per cent. Our revenues are 105 per cent of national average. We have got away with it because the Commonwealth helps us out, and will again increase its grants by 6 per cent in 2008-09 (whereas our own revenue efforts will go up just 2 per cent – if that). Also, at the granting of self-government we had zero debt.
In this Budget we have been spared electoral lollipops and had a fairly neutral outcome, but eventually the ACT will have to find a broader taxation base (difficult) or cop some more Budgets like that of two years ago early in the next election cycle – as in, this time next year.
On a related issue, the Government appears to be walking the tightrope a little more cleverly. This is land release. We hear “affordable housing” all the time. But no politically astute Government can swamp the place with land to really deal with the issue, even though that is an easily achievable way to force prices down. If house prices fall, existing home-owning voters feel cheated. But if they continue to go up at rate higher than earnings, home-seekers and their parents get dispirited and blame government.
The land release program in the Budget (most of which has been announced) will put 3000 block a year on to the market – enough to deal with the 1 per cent projected population with just a bit to spare. Expect land prices to flatten or more likely fall, at least in the outer areas in the next few years.
The issue is perhaps the Government’s most pressing. The climate with a roof over your head is a lot more temperate than without one.